Summary: The Whiskey Rebellion

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In 1791, the United States Congress, urged by Alexander Hamilton, passed a law that placed an excise tax on distilled spirits. During the Revolutionary War, whiskey had increased in popularity because the ingredients could be locally grown and distilled. It was especially prevalent in the frontier states, where it was used to trade as a type of currency. Hamilton, then Secretary of the Treasury, argued that the tax was the best way to service the debt from the American Revolution and to establish the taxation authority of the newly formed federal government. The opposition to the tax came to be known as the Whiskey Rebellion. The response of George Washington and Alexander Hamilton is widely regarded as a critical demonstration of federal power…show more content…
He authored 51 of 85 Federalist Papers, which urged support for the new U.S. Constitution (Mintz and McNeil “Alexander Hamilton’s Financial Program”). When he became Secretary of the Treasury under President Washington, he was thrust into the responsibility of designing the United States financial system. The revolution had left the United States in $54 million of debt including interest (“Hamilton’s Plan to Fix the U.S. Economy”). $25 million of this was owed by states and the paper money that had been issued under the Continental Congress and Articles of Confederation was essentially worthless (Mintz and McNeil “Alexander Hamilton’s Financial Program”). The common assumption was that the overall debt would end up being reduced somewhat and U.S. citizens would receive only partial repayment (“Hamilton’s Plan to Fix the U.S.…show more content…
The U.S. would pay all foreign debt in full. This was obviously necessary in order to establish credibility and maintain relationships with other countries. Hamilton rightfully believed that the long-term success of the U.S. depending just as much on a viable and internationally-respected federal economy as the ideals of liberty, democracy, and alienable rights (Axelrod 46-47). The big surprise was his plan for domestic debt. There were essentially three options for paying the debt – pay it at face value, pay it at market value, or use a practice called discrimination. If the government used discrimination to pay back the domestic debt, present holders would get the highest sell price for their bonds (or certificates) to date and the rest of the face value would go to the original holder. While it sounds fair in theory, many of the original holders were desperate and sold their bonds at steep discounts (as low as ten to fifteen cents on the dollar) out of desperation during the war. They would still be taking a large loss. Not to mention it would be impractical to identify original holders and picking and choosing who got paid would be a poor way for the government to establish the faith of its citizens (Mintz and McNeil “Paying the National Debt”). The federal government was in a tough spot. There was no one option that seemed both completely fair and feasible. The choice was really who the government could afford to upset. Hamilton
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